L.I. HEAD START CHILD DEVELOPMENT SERV. v. KEARSE

United States District Court, Eastern District of New York

May 15, 2000

L.I. HEAD START CHILD DEVELOPMENT SERVICES, INC., ANTHONY MACALUSO AND PAUL ADAMS, INDIVIDUALLY ON THEIR OWN BEHALF AND ON BEHALF OF ALL OTHER PERSONS SIMILARLY SITUATED, PLAINTIFFS,V.JOHN L. KEARSE AND ALPHONSO ANDERSON, AS TRUSTEES OF THE COMMUNITY ACTION AGENCIES INSURANCE GROUP, AND COMMUNITY ACTIONS AGENCIES INSURANCE GROUP, DEFENDANT.

The defendants move for reconsideration of the Court's prior
order holding that "the record does not demonstrate that a
transfer of $497,736, representing Head Start reserve funds,
would threaten the financial well being of the CAAIG Trust." The
defendants submit that the Court overlooked Defendants' Exhibit U
which demonstrated that the net assets available for benefits in
the CAAIG Fund for the year ended August 31, 1997 were $335,298.
As a result, the defendants argue that execution of the Court's
order will cause the CAAIG Fund to transfer all remaining assets
to the detriment of the remaining CAAIG Fund participants.

Another review of the Court's prior order and the record leads
the Court to the view that the defendants' motion for
reconsideration should be denied.

The defendants rely upon the Second Circuit's decision in
Ganton Technologies, Inc. v. National Industrial Group Pension
Plan, 76 F.3d 462 (2d Cir. 1996). First, it is not clear that
the rationale in the Ganton case mandates that the issue as to
whether the CAAIG Fund has the financial stability to pay the
judgment in this matter is a crucial element in this case. As
mentioned in the Court's prior order, the Ganton case involved
a pension fund rather than a health benefit fund. This
distinction was noted by the Second Circuit in Trapani v.
Consolidated Edison Employees' Mut. Aid Soc'y, Inc., 891 F.2d 48
(2d Cir. 1989). In a pension plan, the Court has the critical
policy consideration of protecting the future long range
actuarial protecting of its members. Pension fund members plan
their retirement and future financial well-being on the proceeds
of a pension. With regard to a health benefit fund, members of
the plan have only unvested future interests that may arise if
health benefits become necessary. In addition, while it would
undoubtedly pose a financial burden, remaining members of a
health benefit fund can always purchase other health insurance if
the fund becomes depleted.

Second, the Ganton case involved a pooled pension fund. Here,
by contrast, the Court has previously determined that the "CAAIG
was not a pooled fund and that each of the contributing
employer's funds were segregated." This is an important
distinction because unlike the remaining employees in Ganton,
the remaining employees of the CAAIG Fund, have no interest or
right to the L.I. Head Start reserves. In other words, unlike
Ganton, the plaintiffs in this case are only seeking the return
of their segregated contributions paid on their behalf, not
expended for benefits, and retained by the defendants for the
benefit of other groups that have nothing to do with these
separate contributions. As such, the Court has serious doubts as
to the applicability of the Ganton rationale.

Third, even if the Court were to find that Ganton applied and
mandated a finding that the Court determine the financial
stability of the CAAIG Fund, the Court finds that if this issue
is relevant, there is no evidence in the record demonstrating the
present financial condition of the fund. The defendants reliance
on Exhibit U is misplaced. Exhibit U dates back three years and
does not reflect on the present condition of the Fund. More
importantly, the Court is of the view that the present financial
stability of CAAIG is not relevant as public policy
considerations suggest that the more appropriate date to focus on
is September 1, 1992 — the date that L.I. Head Start withdrew
from the Fund and
was entitled to the return of its reserve funds.

For the same reasons as stated in the Court's analysis of the
defendants' motion for reconsideration, the Court finds that it
would not be appropriate for the Court to deny the award of
prejudgment interest to the plaintiffs due to the purported
instability of CAAIG. As previously stated, there is no evidence
in the record indicating the present financial status of CAAIG.
In addition, if the Court were to deny the award of prejudgment
interest to the plaintiffs, it would essentially be rewarding the
defendants for the depletion of the segregated assets of the
plaintiffs that were requested in 1992. As such, the Court grants
the plaintiffs' motion for reconsideration and directs that the
defendants return to Head Start the sum of $497,736 plus
prejudgment interest from September 1, 1992, to be calculated by
the Clerk of the Court using the United States Treasury Bill
Rate.

If the court finds that certain claimed hours are excessive,
redundant, or otherwise unnecessary, the court should exclude
those hours from its lodestar calculation. Hensley, 461 U.S. at
434, 103 S.Ct. 1933; Luciano, 109 F.3d at 116. Once the initial
lodestar calculation is made, the court should then consider
whether upward or downward adjustments are warranted by factors
such as the extent of success in the litigation and the degree of
risk associated with the claim. Hensley, 461 U.S. at 434 and n.
9, 103 S.Ct. 1933, (citing Johnson v. Georgia Highway Express,
Inc., 488 F.2d 714, 717-719 [5th Cir. 1974]).

The plaintiffs' hourly rates consist of Alexander A. Miuccio,
Esq., $250 per hour and $125 per hour for travel time; Barry L.
Mendelson, Esq., $150 per hour and $75 per hour for travel time;
Gary Wirth, Esq., $150 per hour and $75 per hour for travel time;
and Robert Wasko, Esq., $150 per hour and $75 per hour for travel
time. The hourly rates requested by the plaintiffs are modified
as follows: Alexander A. Miuccio, Esq., $200 per hour and $100
per hour for travel time; Barry L. Mendelson, Esq., $135 per hour
and $65 per hour for travel time; Gary Wirth, Esq., $135 per hour
and $65 per hour for travel time; and Robert Wasko, Esq., $135
per hour and $65 per hour for travel time. Based upon these
applicable rates, the total amount of attorneys' fees is the sum
of $151,375.

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